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Twilio has become the go-to platform for companies who wanted to interact with customers through messaging. Now facing several challenges, will the company's recent turnaround plan prove successful?
November 17, 2022 – By Simon Erickson
Twilio (NYSE: TWLO) wants to become the world’s leading customer engagement platform. Its cloud-based communications software was initially created to help businesses to embed SMS/text messaging within their Smartphone apps to communicate with customers. Businesses like Lyft (Nasdaq: LYFT), Airbnb (Nasdaq: ABNB), and eBay (Nasdaq: EBAY) — who were constantly interacting with customers via texts — were eager to embrace them. Today, Twilio serves more than 280,000 paying customers.
Yet the beloved communications platform-as-a-service provider has been having a terrible year. Revenues are slowing due to a challenging macro environment, losses are mounting due to heavy operating expenses from previous acquisitions, and its go-to-market strategy is struggling as it attempts to win deals with larger enterprises. Thus far in 2022, Twilio’s stock has now fallen by 85%. Its co-founder and CEO Jeff Lawson has recognized many of the problems and announced a corporate restructuring, which recently included laying off 11% of its workforce.
Is this the beginning of the end for Twilio, where there will be even more pain ahead for investors? Or will Twilio succeed in its turnaround plans, meaning its inexpensive stock is actually a huge opportunity?
In this episode of the 7investing podcast, lead advisors Anirban Mahanti, Luke Hallard, and Simon Erickson check in on Twilio. The three provide an overview of Twilio’s business model, discuss where it derives its profit margins, and objectively look at the challenges it faces. They also describe Twilio’s four strategic priorities and its likelihood of succeeding at them.
And in the final segment, each advisor provides a “Twilio score”, to quantify how bullish or bearish they are about investing in the company during the next year.
This conversation was originally recorded live on November 8, 2022. Publicly-traded companies mentioned in this podcast include Salesforce and Twilio. 7investing’s advisors and/or its guests may have positions in the companies that are mentioned.
Simon Erickson 0:09
Hello, everyone, it’s November 8 2022, and welcome to our very special 7investing livestream event. Today’s event is called “Checking in on Twilio.” This is a company that’s been a popular stock in recent years past months going through some challenges right now, we’re going to be taking an objective look as investors at Twilio here today. I’m seven investing CEO Simon Erickson, I’m joined by my fellow 7investing lead advisors, Luke Hallard, and Anirban Mahanti. We’re going to be drilling into Twilio in just a minute, I’m very excited about this conversation. By the way, we’re not going to be holding the the punches, we’re going to be going into both the good and the bad things about the company. But before we start with that, if you’re unfamiliar with seven investing, we are here to empower you to invest in your future. We are believers that the stock market is the greatest compounder of long term wealth. And it’s also a long term journey. And so we provide our seven top stock market ideas each and every month, and an ongoing coverage for each of our recommendations. So if you want to check out seven investing, visit us at 7investing.com/subscribe. and get started with just $1 to get an exclusive sneak peek at what our everything that our platform has to offer. We’re very excited to empower others to invest in their future. Luke in a nearby I’m pretty excited to jump into Twilio. Right now this is one this is a stock that’s down almost 90%, year to date in 2022. But we also see a CEO that has a turnaround plan and a lot of other good things too. But we all agreed this was not a call that was going to be promotional or you know marketing or rah rah cheerleading, we’re going to take a real, real comprehensive and objective look at Twilio kind of excited to dig into this even further. And so just doing kind of some agenda of a live stream here today. This is meant to be an interactive event. At any time, you can actually put questions into the chat that you should hopefully see on the right hand side of the live stream there will take every one of the questions that is asked. And if you’d like to speak live, let us know that as well. But I think that I’ll hit it to a nearby the first who is really dug into Twilio the business. He’s going to chat a little bit about their most recent earnings and some of the insights that he has from that. And then I’d like to hand it to Luke as well, because Luke has been a shareholder of Tullio for several years, and has really been digging in as well. We’ll all have different perspectives on this call, we encourage it to be interactive, and please post with your thoughts as well. And nearby and let’s check it out. Let’s check in on Twilio, the floor is yours, my friends, how does the company look, I know that you’ve been looking at it closely.
Anirban Mahanti 2:40
Alright, so in terms of tears, last quarter, the q3 2022 earnings earnings were actually not bad. revenue grew something like 3%. You know, it’s it’s about a billion dollar run rate on a revenue basis, half a billion dollar run rate and a gross profit basis. That’s a lot of money coming in, through through the door, it’s just not turning that into profits. And that’s because it has been aggressively investing for growth. And I think this model of where, you know, you invest everything that you have, and more for growth works, as long as your top line is growing at a pretty solid pace. That’s where I think the problem is this quarter. Or they basically indicated that for q4, the growth is going to slow down. And they basically are indicating somewhere in the high teens to you know, maybe only 20% sort of growth is what they’re gonna get. And they cite macro as the reason. So the couple of things here, their usage based platform, largely, which means as the usage goes up, you know, they make more money as the usage goes down, they make less money, if they if the usage is going down, that means to increase revenue, they need to bring in more new clients, which becomes harder. And we have to realize it’s a pretty large base. Right? Which brings us to this really interesting question of, if you’re a large, fair $2 billion gross profit run rate and you still don’t make profits, then you’ve got a problem. I think, in my opinion, the you know, then that, of course, announced that they’re going to make some cuts to the workforce, what 11% of their workforce was let go in September, or was announced definite. So that’s going to save, you know, some operating costs, they’re looking to further fine tune the go to market model. That should again, fine tune their costs. The they’re trying to streamline the communications platform, go to market which is likely to you know, introduce a lot more self service into the scheme of things that should again help them so I think all those things are good. I think what a couple of things the market I think in my opinion didn’t like one was political We’re pulling back the long term guidance and the one was guided to 30% sort of growth year over year, over the medium term, the pull that now they’re saying something between 15 and 25%, if you call it 20%, in the in the 20% is a pretty is what you expect a mature software company to do something like what’s what we expect of Salesforce that we expect of ServiceNow. Right, but those companies generate operating profits, and you know, free cash flow. So these guys are not there, Ed are saying that, you know, we’re gonna get to the sort of a more mature state. That’s number one, then I think there’s a bit of a disconnect here in terms of you know, what they talk about how they’re controlling the stock based comp. I think one of the things that management, they maybe they realize, maybe they don’t realize is they talk about stock pic comp as a percentage of revenue, saying that, you know, very 15% or 20% of revenue might appear small. But that’s the problem is that if your market cap has been completely destroyed, then that 20% or 15%, of revenue, stock based comp is actually pretty large. And the current plan basically suggests there’s going to be heavy dilution, so they need to really rethink that and rethink the comp plan. Now, I realize that people you know, that you you issue stock, but you don’t insure the stock at one goal, maybe there are vesting periods, the vest for a period of time, maybe people leave before the vest. So, you know, the dilution is not, you know, 10% of the max dilution that you get at the current market, cap, edit, 20% SBC, maybe all of that is realized, but still, it’s just too large, too high. So that’s the downside. That’s the, the, you know, those are the bad news items that caused the stock, I think, to fall. The good news here, though, would be that the communications platform is extremely strong. The underlying so that a lot of love issues, a lot of adults have been around their declining gross margins. And we can double click into this, that there are double the gross margins have been going down largely because of the messaging business. And that’s, but that’s, I think that’s a computation issue, or how you compute them, because basically, the fees have gone up for for the messaging components, these are the termination fees that the carriers charge. And Twilio is basically just passing through that costs. So basically, it’s adding from its revenue line, it’s basically seeing the fees as revenue, but then it’s not, you know, it’s not charging a margin on it, it’s just passing it through, which means as the fees goes up, the margin goes down. So, you know, I think it’s, it’s neither here nor there that businesses actually see the way, they’ve got a problem of a really strong international messaging business, which has even lower margin if you think about the fees, but on a per message basis, they’re actually making more money, they haven’t actually been able to pass on some price increases there. So that business is really strong. Again, I think it the the underlying business and investing business and strong debit budding software business, which accounts for about 70% in a gross profit of 11%. In revenue terms, the software business that would have higher margins that’s really strong. Flex is at $100 million run rate in four years, that’s really strong. So the underlying the business is actually strong. The question really is now the go to market strategy and the optics of the business. And so the perception, so that’s, you know, I think the final thing I’ll say, before I hand it over to Luke, is there’s a company on what about $8 billion market cap with about $4 billion cash. So, you know, even if they were to burn somebody, they’ve got a lot of runway, if they get to break even, they’ve got a lot of optionality with the cash right now, as long as they make some sensible decisions. And that I’ll stop.
Simon Erickson 8:53
Well, look, I want to hear your thoughts on this as well. But I do want to double click on a couple of things that are nierman said there, which are important. For anyone that has followed Twilio, this has become a communications platform as a service. As Anirban mentioned, its usage based. And it got its start by sending out text messages, right, if you wanted to use Twilio to send out messages, either a promotion for a Black Friday sale, or a holiday sale or something or a limited time promotion or whatever it might be, you can have users opt in, and then get a text message on their phone that they click and then go through the Simon replace orders. And it kind of has expanded over time to include not just messaging, but video and email and social media and all these other things. And those were a lot of those acquisitions that Anirban mentioned too, that had stock based compensation that was attached to them and Anirban. Like, like you mentioned, there’s kind of some complexities with those acquisitions. They have issued a lot of stock for one, and that might be something that’s holding them up right now. But then, like he said, the core business itself in here, but I want to ask you, again about that gross margin of the core business that’s lower than other software companies, but that’s probably because they’re paying the carriers for each one of those tax return those messages that they send? Do you think that Twilio is gross margins that have declined this year? Is that a concern for investors? Or is that just more of a cycle of the economy or related to the business model itself?
Anirban Mahanti 10:15
No. So I think it’s related to business model, I’m not concerned about the gross margin. That’s a head fake. That’s not a problem. I think what I would be concerned about, though, is the growth of gross profit. So I think that’s because let’s the margin, we don’t care about the margin, what we really should care about that is how quickly the gross profits dollars are growing, that has actually been on a steady decline. And if I am reading their commentary correctly, what they’re basically saying is that our top line growth is going to slow, even for the next quarter. If that, it means it really matters as to what the mix is, right? If the top line growth is slowing, because they’re not selling enough software, or higher margin products, then it basically means that the top line has been compensated by the lower margin communications or the messaging business, which means the gross profit dollars are actually going to become even lower in terms of growth rate, right. But if the if the mix changes such that the, the lower margin product is selling less, and the high margin product, which is a smaller proportion, is selling more, that actually the you know, on a year over year, gross profit dollars would grow. But that gross profit dollars growth has been on a decline, steady decline for last few quarters and hit just 25% year over year. So I think that’s a concern, because that tells us how quickly the underlying businesses growing. The overall margin, I think is a head fake. That’s, you know, that’s I think, level one thinking that actually does not matter. In my opinion, what matters is the gross profit dollars and the OPEX of the business.
Simon Erickson 11:50
And one last question here for you before we hear Luke’s perspective, too, but I think this is a good question from Giants 25 of will they re accelerate revenue? Good point, they’ve got the land and expand, maybe they have a problem with the Expand part of that equation. But when will they re accelerate revenue? If
Anirban Mahanti 12:06
Okay, so I’ve got an answer to this. And, you know, referencing our company. So you know, your revenue growth rates for a company like Google has slowed down as well, or alphabet has slowed down. Right. So I think, economically sensitive companies or every company is exposed to the economy to different extent, SP right. The thing is that companies that are usage based tend to very quickly reflect macroeconomic headwinds. And they also tend to reflect very quickly, macroeconomic tailwinds. Right, so remember, this company was growing at a really crazy pace during COVID. Because there was high usage demand, right. So in a way, it’s lapping that now. Now, there is, you know, downturn in certain industries, including crypto and whatnot. Right. So those those are impacting its growth. But again, eventually, you know, it’s gonna have an easier compare next year, at some point, it’s gonna be the beneficiary of the tailwind much quicker than some of the other companies. So, you know, I think, again, I think you can see very, you know, if a quick turnaround here happen as well, when I don’t know if that’s, you know, but I would think that this company should be able to do that 25 30% growth rate for a pretty long time, as long as it has got its go to market strategy figured out I think they’ve had a lot of problems with their go to market strategy. They’ve had George who, who was leading the ship, resign and leave, he left for I don’t know what else to do. He left at an opportune time, he handed the reins for handed over to his deputy, that person didn’t last that long now. Then they’ve got a new person who’s from the board again, you know, so as you have that churn, that that sales organization has undergone a lot of churn, there’s another thing that has happened, as well as which you said a lot of the acquisitions, right? With the acquisitions came sales people, when you are a sales person at a smaller organization. And now all of a sudden, you know, you might be selling into, you know, niche areas. Now, all of a sudden, you’re told not not only how to sell, say, segment or SendGrid, but you have to sell everything else, well, it becomes a difficult task. And you know, it becomes a difficult thing. And it’s very easy to lose your good salespeople when your stock price is going down. So those people leave, creating a void, which creates the pipeline issue and so on. This thing takes time to build but again, you know, when the momentum is there in the business, those things will happen. Right? Because as I said, the software business is really strong and the messaging business actually is really strong estimate and they’ve got 2000 They’ve got 50% of global one global 2000 as customers already they have some very large clients. If you look at the dollar $1 million fund $8 billion 10 million annual recurring revenue, or annual contract value clients, those have been growing really quickly. So this, this company has its foot, you know, across the door for some big clients. It’s a question of executing on the vision and having that go to market strategy. Right. So I think it can go back to growth. But in right now, the issue really is execution. And we can fault essentially, Jeff Lawson and company for the poor execution to date. Right. So the question is, Can he turn around the ship? That’ll be the question.
Luke Hallard 15:38
And I wonder if that’s an interesting point for me to jump in as well. Because I put in a shareholder for a couple of years, kind of kicking myself a little bit, I feel like I’ve been asleep at the wheel, I haven’t really monitored this one in my own portfolio, Jeff, is that by all accounts are an incredible technology first leader, I actually interviewed a chap who’s worked with him about a year and a half gone on my previous podcast. And, you know, he was raving about how close to knock on the cutting edge, Jeff Lawson is really understands technology, but you can have a great technology. But if you don’t have the right business skills, you can’t translate that into earnings and profit. And I think that’s what’s gone wrong. And you know, Anirban, you talked about the potential for turnaround. Like, let’s contextualize this. So this is an incredibly important operational technology that Twilio has customers. This isn’t like something behind the scenes that like a Slack or, you know, something on monitoring tool, where you could go, Okay, guys, it’s not working out, we’re gonna swap it out for something else, we’re gonna take a little bit of pain. This is like if I’m Uber, and you know, this is a core operational part of my business. And I’m sending maybe like hundreds of millions of messages every day, using Twilio. So that like, there’s no way Twilio, we’re going to start hemorrhaging customers, really. And it’s a very cost effective solution. So you know, I don’t doubt for a minute that it’s a strong robust business that will continue to grow, continue to acquire new customers. And with its, you know, it’s got a good dog and I will be the darkness coming down along with it. But dollar base net revenue retention, but it’s still like north of 120%. So
Simon Erickson 17:23
to find Riverview is going to what is Governor, what did what does it mean dollar base, that particular revenue retention? What does that term mean?
Luke Hallard 17:29
So for every dollar the company earns from its customers this year, on average with say, 120%, w 11 $1.20, next year, that will compound kind of getting more wallet share from your existing customers. And that’s a great reliable kind of money in the bank way to grow, particularly if you have, you know, operationally critical product, like Twilio is it’s so kind of unsetting out a bit of context, when I’m going to say because, you know, really important technology, it’s not going it’s not going away. But you’ve got this great technologist, and he hasn’t demonstrated that he can run a great business and generate returns for shareholders. And I’m kind of sympathetic, right? Because many, many businesses were caught wrong footed by kind of coming out of the pandemic, and all of the problems that, you know, inflation and all the other issues we’ve had this year, but Twilio, you know, they’re up there with the worst of them, really, in terms of kind of how they’re suffering. They’ve, I like the steps that they talked about in the earnings call a few days ago, where I think they’ve done keep me honest, Anirban, I think they’ve, they’ve exited 11% of their team. And now they’ve they’re doing a lot of kind of consolidation around costs and trying to be a bit more sensible. But actually, if you if you’ve already sort of weaved through the narrative, it’s just too slow, I think, to be honest. So as they go into 2023, they’re gonna start turning up the dial start moving towards non GAAP, very important non GAAP kind of operational profitability. I think I saw a comment in the earnings call that free cash flow is three to five years away. I mean, that’s kind of unforgivable in the current market, I know they’ve got a long way to go to get to generating free cash flow, but the market is not going to look kindly on them for that for the next year or so. So as I look at this in my own portfolio, I think there are other companies that have suffered, you know, equal or or, you know, even bigger drawdowns over the last year. I think those companies, other companies might be more poised to make a faster comeback, just because of this, you know, rather slow kind of turning of the ship that Twilio has planned. You know, I think the business is good. I don’t unfortunately think the leadership team are good. They don’t seem to have a CFO from what I can tell. They’ve got a chap who is the CEO, he seems to have a very broad range of responsibilities. You know, I definitely see that If the valuation stays where it is, or turn south, you know, there could be under a lot of pressure apps from activist investors. And you know, maybe ultimately an acquisition, and perhaps that’s the best outcome for shareholders today.
Anirban Mahanti 20:13
Yeah. Can I absolutely have a quick, just a quick rejoinder on that? So? I think I would, I would not say that there have been that bad in execution in a way. Reason, I would say. So they made mistakes. But I think one of the things that is happening here is that we’re looking at it from a shareholder returns perspective, right? So looking at the shareholder returns being decimated, and saying that, well, you know, that they’re poor job, right? What did you do counterpoint that, for example, they made acquisitions, but they did not use, they did not raise capital, or they did not, you know, you should get convertible notes and things like that. They actually use the overpriced stock to make those acquisitions in a way. So you know that, so that was good. Right? So that was pretty smart. So they acquired both SendGrid and segment using basically their stock. Right? So I think that that’s good. The so ship Chandler was the CEO. He’s basically he was the CFO. And I think he was the CFO, and then he’s got this dual role. I mean, he’s basically his role seems to be CFO ish. And because he’s basically dealing with all the numbers and reporting all the numbers equivalent. So I think, in my mind, I think the issue that I got is, and I think if we get to non GAAP operating profit, they should get pretty close to free cash flow as well. Right? I think you know, it basically a non GAAP operating profit would mean that they’re basically issuing, you know, the county adding back the stock, if the stock is comp, and that’s basically allow them to get generate operating profits by the end of 2023, then I would think that they will be getting pretty close to free cash flow. Again, free cash will also be a non GAAP number, right, because we’re going to add back the SBC. Yeah, the issue though, I think, is that if they’re calculate, in my mind, and I think this is the reason why the stock is down, even if, if they are thinking they’re going to add back 20% stock to get the free cash flow, they can get to free cash flow, but the stock would be dead. I think that’s the I think, in my mind, that’s the problem that they’ve got. There’s some, but there’s some simple solutions to that, you know, they make me CFO for this company, I could solve this, I would just, I just basically do a $2 billion buyback, right, or, you know, issue a $3 billion buyback, because I could then buy back not only the shares I issue, but I could buy back support shares in the market. And I can very quickly get to free cash flow positive, at which time hopefully, my valuation has, has reverted as well, it is very hard.
Luke Hallard 22:55
There was an interesting comment on that in the earnings call, because ship Chandler did, he was challenged on doing a buyback by one of the analysts towards the end of the call. And he said he, you know, he’s open to that. But I think Jeff chimed in on the same point and also said, you know, they love having this kind of cash Hoard. And they’re also thinking about acquisitions in the space of AI. So you know, that there might be more spend still, and he’s talking about using the cash because he can’t use his stock anymore, right? Because it’s, you know, been devalued, so heavily. There’s a can of worms, and we’ll go into a bit later about AI.
Anirban Mahanti 23:29
Yeah. So I think like, I would be surprised if they get away get an opportunity to do an acquisition, right. Or if they do an acquisition, their share shares are going to be called in half again. So I think, as a management team, it this at this point. They see, here’s the thing, I think they made the deck and the presentation for the analyst day, and the q3 culture together. And they came up with this deck before the shares actually fell 40%. Right.
Luke Hallard 24:00
So the world news,
Anirban Mahanti 24:03
move with them. And I think an acquisition is completely out if like, I mean, if you have to be down two and double it to actually make an acquisition. Right now, they have got some capital allocation decisions to make, I wouldn’t be surprised if really, if they don’t come back and say we’re going to do is a you know, an SPC or a stock buyback. If they don’t do that, as you said, you know, Simon has seen some activity is going to come on board, raise a lot of noise. You know, also P is going to make a lot of them and offer a $10 billion which can be very difficult for them to at that point, you know, somebody loves an offer it at 30% More than the current price. It’s going to be very difficult for the board to turn that down. Like the independent board members will not be able to turn it down. Right Jeff Lawson might not like it, but he’s gonna be one person among the many in the board to turn it down. So I think they’re really sticky position and they really need to feel Going out to capital allocation. But yeah, that’s what I think I’ll stop.
Simon Erickson 25:05
You know, at the at the end of this call, I’m going to ask myself, Luke and Anirban, all to rank Twilio on a scale of one to 10 of how bullish they are about the company change as you’re going out and buying Twilio right after this call is over 10 As you are selling your shares and burning them on fire on the way out, but you know, I’d like everyone in the audience to chime in to in the chat on one to 10. How bullish Are you? What is completely bearish tense, completely bullish on Twilio? Today, I do have some thoughts that I wanted to add to this. This is incredible discussion, some great points that have been raised here. I wanted to comment about the acquisitions and the change in the go to market approach. Because when Twilio was founded by Jeff Lawson, and a couple other co founders, this was a business that was sold to developers, this was not going to CIOs, and you know, management decision makers, or administrators, it was one of the developers that said, Hey, we can build something on top of this, this communications as a platform services really pretty awesome. And it’s also pretty cheap. The core SMS messaging costs a fraction of a penny point 0079 cents per text message you send out. And so if you do the math on that, if you send this out to 10,000, people that have opted in to receive your chocolate crush is $79, you’re probably going to get a pretty good return on that. And we, my perspective is that Twilio in that core platform, that core messaging, perhaps even email, this this kind of core platform that they have, they can still raise prices quite a bit, maybe 50%, even and still get a good ROI for the customers. The other point that was made was the acquisitions. Specifically, when we’re talking about acquisitions, we’re talking about three transactions, Twilio acquired SendGrid, for email API platform for $2 billion, and all stock in 2019. That’s a lot of money. And also then acquired segment, which was Customer Data Platform wanted to break down these walls, or the silos of data so that the customers that were using them could see a lot more comprehensive view of who was who they were sending the the offers to. And it paid $3.2 billion for that, and 2020 also all stock. And then they acquired zip whip, which was for full toll free when 100 kind of numbers free messaging for $839 million in 2021. And I think this is an interesting dynamic right now. Because as we’ve mentioned, this is land and expand right getting with messaging, then start doing email, then you start expanding into social and then you start doing all these other things, video, whatever else it is, but Twilio paid kind of premium price for those acquisitions. And now even though it’s making progress, most of them are growing pretty pretty well, as everyone points out, you know, the stock based compensation, the the, the the premium to what they paid, or what some of those companies might have been worth at the time. I mean, some of those mistakes, perhaps in the transactions, it didn’t seem like there was such a big deal during the bull market and the growth phase out there a couple of years ago that we were in, now it’s coming back to bite them, again, usage based model in the middle of constricting economy, this is really a challenging and macro situation to be in. And then the last thing I wanted to
Luke Hallard 27:59
just show you ready for your view of those acquisitions, because Twilio today is a very different company that, you know, Jeff founded in 2000, late 2009. And I do wonder, as they kind of got outside of their lane a little bit with, you know, getting away from the core messaging. And if you look, I’m not super familiar with the acquisitions, and how they kind of change their capabilities or title for their customer. But it seems like they’re trying to put themselves more at the center of the kind of customer relationship is that just not their core competency, or even, you know, perhaps worse is that something is kind of not possible for them to as the essentially the Message Broker.
Simon Erickson 28:39
The core based upon messaging about SMS was was fantastic, you know, revolutionary at the time everybody was using, that’s why Twilio became the stock that you saw the stock return that it did in years past. And again, it was very cheap, very good ROI. So something that’s just like customer facing, I told you is very mission is to be the ultimate customer engagement platform of the world. And one of the terms we throw around with our own advisors here at seven investing is are they empire building? Are they so committed to this bigger picture vision, that it doesn’t matter if you’re going out and paying 14 times sales to acquire SendGrid, you want to get into email, and then you want through segments to have a more comprehensive view of your customer. You want to get into video. It’s like at some point, yes, land and expand, you see the upside for things like that. But when the economy turns the other way, you’re sometimes stuck holding the bag on a bloated organization that’s not getting the bang for its buck. I think that’s where Twilio stands today. And Jeff Lawson just one more time before I want to open it back up, you know, Anirban feel free to jump in on this too. But Twilio has four priorities that Jeff Lawson has addressed for how he wants to turn the ship around right now. What is the plan? We mentioned earlier, the laying off about 10% of their global workforce, about 1000 people about 10,000 people have already been laid off. They’ve got some restructuring costs associated with that that made their way into earnings. But four priorities that Lawson laid out investing in platform reliability and trust. I’d say for the most part they’ve got That’s an iterative improvement, increasing the profitability of messaging, we saw messaging increase 5% 5% price increase, they didn’t lose any customers on that. 122%, still VNR. So you can still increase that iteratively if you want to get a better margin profile on your core platform, accelerating segment adoption, this is something that we compete against a CRM platform like Salesforce, where you want to have more a comprehensive view of like, okay, we did this campaign, not just this many people open the campaign, but we got this much revenue from it, this is who they are, this is where they’re buying from all of those things, you know, knocking down those data silos, if you will. And as scaling the flex customer bases for contact centers, customer service, they’ve just signed two very large deals with insurance companies, property and casualty insurers that have agents that want to have context and follow up with claims and things like that. If they can scale that to truly massive organizations, there could be a huge improvement to the to the profit margin profile. So I’ll throw it back to you guys. I do see a turnaround plan is in place. I think the execution of this is going to be very hard during the constricting economy that we’re in for the next year or two, maybe longer than that, who knows. But at least Lawson is recognizing, hey, Mia culpa, we have some mistakes we’ve made in the past, let’s go ahead and at least try to fix some of them.
Anirban Mahanti 31:15
So I just want to just provide some context. So so they so the acquisitions that they made SendGrid was the email acquisition, which fits in into communications overall into companies, it’s recognized inside communications now. See, here’s the thing, the thing is that the core platform has actually been growing so quickly, that emails contribution to the communications platform is only 10%. So the reason they acquired it, so when they acquired a tool, it was only growing at 30%, they were actually slower growing business, relative to the core communications platform business is growing, which has been growing circa 50% per annum. So they’ve got the core business is actually super strong. They acquired this because it’s higher margin. And it sort of fits in with this, you know, this high level view of having just greater visibility, providing the multiple different tools for communication, whether it’s email, messaging, customer data, seeing how campaigns work, and things like that. Right. So the quality for that, but I think, you know, you could ask to Simon’s point, say that, you know, they paid 3.2 billion or something like that, or 2 billion for I think, SendGrid. You know, was it worth it. But again, they paid using high priced stocks, in my mind, it’s neither here nor there. It’s sort of fits in, I think that that it fits in with the larger, larger goal of the platform where they want to turn it into, I think the issue is I keep coming back to is that they’ve got all these different pieces that are actually not contributing a lot of revenue that they want to turn into, you know, they want to take the five pieces and turn it into like, you know, the two plus two plus two is not four, but five, they want to turn it into a bigger piece. That’s just not working for them. I think that’s where their problem is. So this keeps throwing salespeople at this and that added. And I think that’s where the problem is the other thing, I think they have not realized probably, and they should have realized this is selling the comps is different from selling software. They have different buying buying centers, right. So your software business is not growing as quickly when you would expect it to grow quickly. Because you have a very strong comms business and you’re a comms platform. You have people who know how to sell comms, not software. I think that’s that’s so we see that with the distribution. So the disclosures, actually, the analysts, they are really eye opening in my mind. I mean, they’ve got messaging just got lower margin mixed margin, they’ve got email, just higher margin below growth, then if you look at what they’ve been able to pass on cost, and if you look at software, the, you know, largely their software revenue segment. Right, so 60% of their software revenue is basically segment acquisition. And flex, which is organic, really, is is about 20%. But it’s already at $100 million run rate. So I think, you know, I think it’s, I think they’re a victim of circumstances if their share price was not cut as much as as been cut. And people did not think it’s dying, which I don’t think it is, if you look at you know, it’s another way to think of an enterprise sales company is to look at how many $10 million $1 million. So they a lot of the other companies that we talk about that have also seen the value car. I would, I would question though, they actually do not have $10 million deals at this volume. Right? So this company, for example, between 2020 and 2022, has seen its $10 million deals go from seven to 27. That’s pretty significant for a company of $8 billion market cap. Same thing. If you look at $5 million dollar plus deals, it’s gone from 17 to 65. That’s pretty significant. Again, many of those companies whose valuations haven’t been caught as much maybe as failures as or or maybe to this valuation had got to far ahead, don’t have those customers, right. So I think the penetration that they’ve got in the global 2000 The the size of deals that they’re doing, I think they’ve got the basic pieces. But I think it’s the, the the turmoil at that CEO level. So basically, George who used to be CEO, then when he left, I think that’s where the problem started. And maybe I should have picked up on that. He was an excellent CEO. He left and Mark burr dusky was now actually president of revenue at Cloudflare. He became chief of revenue or something. He was, I think, you know, one of the lieutenants, I’m the George, who, he didn’t last very long in that position. And then they’ve got now Elana Daniel, who has come in as prisoners, she was a board member. So I think that churn at that, at that level. So I mean, as a CEO, my job would be to set the vision, right and said, Okay, this is what we want to do. If you’ve got all these great pieces now go make it work, some of the things is just going and getting the sales, making the sales happen, right, you might have a great product, but you have to also need a great sales service. And that’s where the failure is. The failure is at the sales organization level. Failure is the integration of the salespeople failures that they’re trying to figure out. You know, those people who are selling segment making themselves hot hubs is hard. Same thing, those people who are selling, you know, email, can they sell segment? Right. But still, the fact that they’ve got flex at $100 million run rate in about four years is pretty significant. So they’ve got, you know, it’s question of scaling the right people. And the scaling, or the wrong people, I guess, is that is the question in my mind.
Luke Hallard 36:50
So I think they’re facing in for that to some extent. So in the insulin narrative, where they brought to life where they get those 11% headcount reductions, I think, primarily that was in the sales organization. And they’ve done a lot of restructuring to focus people around, you know, core competencies in the core products. They’ve also made some changes in kind of r&d to streamline the organization and kind of offshoring some of their GNA type roles. So I guess they are starting to focus on but not to sort of harp on about it. I think they’re probably not doing enough. And the fact that it sounds like they’ve made the cuts now, you know, the 11% behind them, now they’re slowing growth will, you know, that’s a very far cry from some of the actions that say musk and Zuckerberg are taking right now to, you know, in some ways address similar kind of costs, challenges in that businesses.
Anirban Mahanti 37:41
Yes. I quickly add one point. So one of the changes that they’ve made now is that change gone from what they said that they have a functional leadership. So what I read that as, instead of having product leadership, you have, you know, okay, I’m going to take software sales, and we’ll take comm sales, or I’m going to lead the software side, I’m going to leave the comp side. And that allows for more collaborations of a apple like organization, just functional leadership versus product leadership. And that removes the friction of, you know, my product versus your product. It’s our product. So maybe that will make a difference. But yeah, like, I mean, I think the another way to think about this is that I think we overrate what a CEO does a good CEO CEO combination is is is is very difficult. I think that the loss of having a good CEO is actually what it’s biting them. Right. And as you said, the current CEO is basically the CFO. It’s, and it shows up in the shareholders letters, too, because the shareholder letters, the CEO, comments, President revenue comments, then the CEO comments, which really the CEO is not the CEO, the CEO and CFO, in a way. So I think those are the organizational changes that they’ve got.
Simon Erickson 39:01
And I’ll comment on that one, too, is someone who did a decade in enterprise sales that it’s it’s very challenging for restructuring a sales organization. It sounds so easy. Oh, you just sold enterprise nine to sell developers already sold from developers isotoner. It’s really a lot harder than it sounds on paper for investors. You know, you we’ve seen this time and time again, with companies trying to figure out how to change this and it doesn’t really work very, very well. We saw Splunk Splunk was another usage based platform. You know, they were indexing unstructured data. They said hey, Splunk has got a really cool platform that developers love. Let’s just go out there and start selling you to see the enterprise at the enterprise level. And they put tons of money into this they put tons of money into the Salesforce never quite captured it at least what they were expected to on the opposite side and everyone we’ve talked a lot about Okta, recently right Octo was selling at the enterprise level capturing really fat you know, 25% margins, cash flow margins from the enterprise and then they tried to go out through the and sell developers through the OD zero acquisition is very, very difficult kind of an awkward transition can enlist others right, you know, Alteryx others. This is a common problem, especially with cloud computing, that it’s challenging to try to one, train your sales reps, how to sell to a different client base, and then to try to convince your customers to buy what you want them to buy in this land and expand empire building. It’s a great point to that I think Todd and Todd makes in our chat here. He says that one of the problems is that they have not expanded on their acquisitions, they’ve not integrated or bundled their capabilities to create more verticalized solutions, which many of their competitors had, I would just add to that great point, Todd. Salesforce is the master of building out verticals and making acquisitions to attract those, and then really, really, you know, hammering home the ROA ROI, of what they’re selling, I haven’t seen least not Yeah, totally has grown its divisions pretty pretty well, but I don’t think the acquisitions they’ve really gone to the same pains of of quantifying that. And then he also went on to say that they’re not an enterprise sales company. I think that’s a good point, too. I want to get into the scoring, just to kind of keep this moving along, knowing that we’re up on about 45 minutes in here. Also some other great points from Sandeep saying, you know, Uber migrated away from Twilio. And now seems to use an in house solution. Yes, that’s always an option that you can build versus buy, if you if you have this, Luke, or didn’t you want to talk talk about that. Maybe other customers doing something similar to what Uber did, because another Uber was a really big percentage of Toyota’s revenue for quite some time
Luke Hallard 41:22
there. Actually, I felt that they’d have lost that customer bad example earlier. But, you know, I think my point stands out that the customers they do, not every customer has got the deep pockets of an Uber, who can afford to build this stuff and scale profitably, you know, if you’re going directly to their networks and email providers, for we’re not going to get the same deal. But a Twilio would get on your behalf. So quite hard for the customers to want love for them. But maybe I’ll throw in a point that’s kind of been, it’s been actually been in the back of my mind since I became a Twilio shareholder. But it becomes a bit more pronounced now. And, like, I know they’re making moves into video. But essentially, the messaging and voice are the core of their capability, and is where they get the majority of their revenues from. And maybe if I just if we just sort of think strategically on where the world is going, over the next five years, 10 years, like the rise, I feel like Twilio getting squeezed, or they will get squeezed at some point, the big shift is the rise of intelligent digital assistants. And like a large majority of the use cases for a company like Twilio, our kind of contact center type stuff, you know, business to customer trying to deal with a complaint or a sale or something. And, like, we’re almost at the stage that intelligent assistants can kind of cover, like the large majority of those interactions, and maybe like a small percentage get kind of handed off or escalated to a real human, well, you probably don’t need anywhere near as many voice interactions or text message or messaging interactions. If there’s someone on a chatbot I know chat bots can be incredibly frustrating today, but they’re getting better. So that’s kind of one Strategic Force, I think, start squeezing them at one end than the other end, you know, the getting into video. But the large majority of their of their source of revenues is voice and messaging. Where where a company has like a high value customer engagement, we’re seeing with many of the banks now. Then moving to video engagement, because you can do look someone in the ID, your KYC, you know, show me your passport, and you can have a much richer conversation or, you know, like a wealth management conversation with somebody who works at your bank or applying for a mortgage or something. So I think business is where it makes sense to do so because it’s obviously very expensive ties up their own people. They’re moving in that direction. So again, they’re moving kind of away from just kind of voice talking to some, you know, impersonal somebody at the end of a phone line. So I do wonder if these two forces are overtime, we’re going to kind of start exercising and compression on at least slow growth, if not kind of starts reverse growth.
Simon Erickson 44:14
Great points. One other question I wanted to ask before, I’m going to ask each of you to give me a one to 10 quantitative number on how likely you are to invest in Twilio today. But there was another question I thought was a really good one from giants here. He or she is asking what metrics should we watch to determine if they are making progress? Again, Twilio has laid out their turnaround plan, Jeff Lawson has saying you know we are going to make some fixes. I think in correlation to those I think two things we should certainly be watching is the core platform, we should be watching for price increases and improved gross margin in the communications platform that they have, you know, messaging is going to be a little bit more expensive because it’s more than enough wiggle room there. And then the one thing we haven’t really talked about yet is one of the metrics that I think is very important, if not a hard met trickle nice announcements of how well Twilio engage is going to be doing this as the product they’ve been working on for the last two years of basically saying, if we want to sell the the enterprise, we want to package all these acquisitions together, and then kind of have an automated way for their marketers to do their job. Twilio engage is going to be that it’s going to include, you know, all the SendGrid stuff, all of the things that they had in the core platform, certainly all of the acquisitions that they had before, tied together through through that segments, customer data platform that you know, gives context of who you’re who you’re sending the campaigns to, if engage catches on, I didn’t get this all in one, you know, full buffet, whole enchilada, whatever. But you know, whatever analogy you want to use for it, that’s a really good thing. I mean, he’s actually are going to start selling to the enterprise and fixing a lot of things they need to fix. If not, this might be a lot harder of a problem to solve, than they anticipate. And we might see further cost cutting in the future, Luke or Anirban, any thoughts on the metrics or any things that you’re watching kind of going forward here?
Anirban Mahanti 45:55
So I want to correct a few things. I would say that, you know, I think it’s wrong to say this company, or at least in my opinion, romper says company does not sell to enterprise, it does. Like, I mean, those $10 million deals, though $5 million deals are $1 million deals or enterprise deals. Right? It’s just that it’s selling mostly, I think, comes to those people. But it is still an enterprise level deal. I think it’s just the buying center is different this is the thing that we need to remember is that the buying center for comps versus buying sell for software, I think that’s where the big challenge is for engaged, right? They say engage has to find a different buying center. Right? So that sales force is going to it’s not just about the product, the sales force for that is actually going to be markedly different. It so so these, I mean, in terms of progress, the number one thing I would watch is how the effects is growing or slowing. So I would like to see them generate more operating leverage at at a $2 billion gross profit run rate. Even if you’re growing 20% 45%. If you can’t generate operating leverage, there is some problem somewhere in your organization that you need to really address. That will be number one, in my mind is, you know, I want to see steady operating leverage, I want to see the gross profit grow at a steady rate. You know, because everything else is going to be shrouded in, you know, what margins were this that so let’s look at the gross profit and say, Well, you know, Can I Can the gross profit, at least grow around, actually get back to, you know, 30% level, if the gross profit is growing at 30% level, I’ll actually be pretty good. It now it looks like it’s trending actually to the you know, to low teens and mid teens. next quarter. But I think that can again, pretty quickly turn it around because of the usage based model. So in my mind, it’s really at a high level OpEx. And the back to growth for the gross profit level. Those are two things that would matter. The most, and of course, the you know, look at the DNR, the DNR can be a bit misleading, right, because I mean, if your DNR is 140%, then you you know and your your growth is, is is 30% then you only get 10% growth from everything else, right? The it’s because I think there’s quite a bit of churn that gets, you know, you’re hiding the churn because the DNR is looking at the customers that you have maintained across the two periods. So it doesn’t include the churn. It’s not a net retention rate in that sense. So, but yeah, but I think if we look at gross profit, growth, and OPEX and the operating leverage, I think those would be the things that we watch. Finally, I would like to see that do something with their cash, which is not an acquisition.
Luke Hallard 48:49
support everything Annabelle said I can’t, I’d love to see them just be a bit more clean and tidy with the kind of gaps and non GAAP reporting. Like if you look at their GAAP numbers are pretty horrible, like GAAP loss from operations as increased because pretty consistently quarter after quarter, I’d like to see them starting to turn that round. And I think Chandler pig I don’t think you’re committed to but he responded to an analyst on the call this week to say they would start guiding for gross profit that that’ll be helpful. At least we can see this. They’re sort of stalled. They’re setting out in terms of some of the metrics Anirban described, and whether they’re starting to deliver on those forecasts.
Simon Erickson 49:33
One one last thing that I wanted to introduce was that Twilio is pretty cheap right now by at least most of the metrics we look at is a company that’s doing about $4 billion of the semi annual run rate right now for $4 billion in sales has an $8 billion market cap and when you exclude or you consider the debt and then exclude the cash, like everyone was mentioning, it’s really only an enterprise value about five and a half billion dollars. The combination of losses him and his other co founders together have got super voting Class B shares. But even considering those are still have less than 30% of the voting power of Twilio, there is certainly influence from the board that is unhappy about these bloated operating costs they’ve been incurring. Do you think that Twilio? I think you, you mentioned earlier Nirvan. But do you think that Twilio is on the table of either an outright acquisition, or at least an activist investor coming in and shaking? Some things up from a management perspective?
Anirban Mahanti 50:31
Yeah, like, I mean, it’s, I think I said, you know, 2% premium, and Salesforce buys this, and that use users, it’s super streamlined sales for a Salesforce, to actually, you know, do what Jeff Lawson hasn’t been able to do. You know, and for Salesforce, that might mean bringing in a product leader like Jeff Lawson, who comes from the Salesforce table actually, right. In, you know, having, you know, to helps with their succession planning and things like that actually might make. And given that you got $4 billion of cash, or 3 billion when you exclude the debt, you know, 10 billion $12 billion acquisition actually is pretty smart, you paid 12 billion, and you’re actually only paying an enterprise value of like, 8 billion. And you and you know, and it would, it would actually nicely fit ourselves, I think that’s very much possible. The one thing I didn’t look at the short interest actually, the short interest is not that high, for a company that has catered completely challenges is less than 5%. So that sometimes gives me pause and say, some other people can come and short this and actually, you know, drive the price, I do think if the price goes further down, the more it goes down, the more it becomes interesting. For an activist player or AP, for example, AP people can come in, strip the company out, sell bits and pieces to different people. And maybe there’s more value to be had by, you know, by instead, the sum of parts probably does not equal the market cap today. So you can sell everything in pieces, and you get more value out of it. So I think, as we’ve talked about this before, I think the board must be must be if the board is doing its job, should be pressuring Laos, Lawson to actually behave himself in as a tank to behave and show what you can do. You know, as Luke was saying, in terms of execution, so yeah,
Simon Erickson 52:30
absolutely. Great points there. That addressed I think one of the questions from Sri about is there still a downside risk potential for the company like this? Yes. Certainly. Our company that’s only 5% short interest has got plenty of downside potential even from now, if not counteracted by the fact that it is pretty cheap, at least traditional compared to its traditional valuation, multiple metrics. He was asking us to call recorded Yes, we are going we are recording this, we’re going to publish it as a podcast, or also to our YouTube channel, which we put earlier in the chapter. If you’d like to follow up on any part of this. Look, let me start with you. You. You are the total shareholder for several years, I’m sorry, that the shares are down more than 80% here in 2022. Where are you one to 10 on Twilio? Today, as an investor?
Luke Hallard 53:14
Simon, you know, it’s not the worst performer in my portfolio by some margin, so don’t worry. I’m gonna borrow a term from our colleague, Matt Cochrane, excellent PAGASA innovations to the record rebound. Like I certainly think Twilio is a rebound, not a wreck. But if I think about my son gonna give you two scores on a cheat a little bit. If I if I were not a shareholder as being entirely impartial, I think they would get like maybe a three and a half or four from me. But I am a shareholder. And I’m very, very strongly considering no longer being a shareholder. And the reason is, I do actually think we’re probably nearer to a floor hadn’t considered that the sort of short potential I think we’ve written nearer to, you know, can it get much cheaper? It’s almost on my kidney, easy to sales of one 1.2 Something like that. Can’t get much cheaper. I don’t think, caveat, you know, do your own due diligence. But, so where am I going with this? Sorry, let me bring it back in. I think there are better places for my investing dollars today. So the the small allocation I have in Twilio today, I think is probably has a higher chance of rebounding faster or more reliably in some of my other beaten down companies in my portfolio. So my personal score is a too afraid
Simon Erickson 54:44
to that’s, that’s on the glass half empty side of the spectrum there on airborne one to 10 Where do you fall on Twilio?
Anirban Mahanti 54:51
Well, I used to have a large shareholding in Twilio and now it’s a really small shareholding and that’s just fine. For many of my other students at Ultra down to look at 1.4 trillion holding was probably about 7% or 6% of my portfolio. That was when the stock was $400, or something like that. So, that aside, yeah, so I’ve thought about a couple of things, you know, I have a hard time selling this right now, largely because it’s got a great founder leader, it’s got great tech, and the sum of parts seems more than the value that they have been assigned. And the $4 billion of cash, I think, is a significant this is a couple of thoughts running out of cash, is in other words, there is a significant floor just there. And, you know, as you said, it’s like selling at one time sales, in adjust for the adjust for the lower gross margins is, let’s call it two times sales. it a little bit of turnaround, a little bit of macro change, wouldn’t take wouldn’t require it a lot to go from, like, it’s, it’s one time sales multiple to a six times sales multiple, right, that will be a six bagger. And it’s not, you know, usually I would bet. So the the other thing I’d say is that, you know, there have been many companies like this, like, you know, Netflix, for example, has seen 90% drawdowns previously, and then went on to become 50 baguettes from there. Right. So, those tend to happen, but not often, but they tend to only happen with companies that are run by great leaders, founders who, you know, have a vision and, you know, want to run and can manage to difficult is Jeff Lawson, a Reed Hastings? I don’t know. They will be but, you know, seems to be that there’s potentially there’s just valuation is too cheap. The is there more downside? Potentially, yes. But, you know, the, the way I see this is there is a probability of it going down, but other 50% but there is a probability of it going up 10x, just in normalization of valuation, and a little bit better execution, a little bit favorable macro. And, on that scale, if you just think probabilistically, it seems that, you know, if I was to, if because I hold the shares, it seems favorable to me to hold, even if if a 10x is a 5x is probably I would not get the return, I was thinking I would get out of this. But it would be significantly market beating from yourself continue holding it. The only thing I’ve thought about is, you know, if I want to, if I want to be cheeky and play this, sell my shares, replace them by a call option, dated 2025, that gets you leveraged upside down and, you know,
Simon Erickson 57:45
you’re, you’re scoring, and that’s an asterix or whatever the number you’re gonna call options. But yeah,
Anirban Mahanti 57:51
you get caught off guard. Yeah. You know, I, you know, I didn’t think about buying actually some call options, that I didn’t think that a lot of my money has already been under fire, it’s all powered by buying more call options by just mean that if the market doesn’t turn by 2025, it just boards even more, but it’s I think the balance sheet, so I’ll give it a five. If I wasn’t a shareholder, I wouldn’t be rushing to buy, I would rather wait for one more earnings call or for some action from their side that suggests that they are making the right moves, when if they make the right move in the market sees that the stock is going to at that time bounced pretty significantly pretty hard. But that might be the better time to buy because you know, you might lose a 40% 50% rise. That might happen on the back of good news. But that might also indicate that the management is up to the task. I would be really surprised that said the board would be derelict in its duties to the shareholders. If it did not make Jeff Lawson do the right thing. That will be just it, the board would get sued. Like I mean, there is no doubt I mean, the board is probably going to get sued anyways because the stock is down 90%. But they would be derelict in their duty if they did not stop him from making another acquisition and did not make him cut costs and did not make it right, the shift. Right. So I think that’s something to keep in mind.
Simon Erickson 59:21
And I think that’s a good point. I’m gonna get to my own score here too. We’ve seen we’ve seen all over the map in the chat here. We’ve seen fives and sixes, and we’ve seen a two. For me personally, I’m going to give two scores to I’m gonna do what Luke did. I’m going to break their own rules. And I’m going to say that within the next one year, if we were a trader on this if we were a short term trader on Twilio right now, I’m going to two because I think anything can happen. I think the economy is going through a tough time I don’t think that the usage base model is going to be conducive to this it’s got way too much overhead. All the reasons we talked about I’m pretty bearish short term. But then I also look at this and I say you know you’ve got a company now it is a two time sales and marketing cap with less than one and a half times sales on the enterprise value, you’ve got a very good leader that I think it’s six months, I think he gets six months to patients to get his action plan actually work, we have to quarterly results. And then if we don’t, I almost certainly you know, you’ve got the the insiders holding less than 30% voting control, even with the Super voting shares, and I think that’s just an invitation cash rich company, embedded with customers, you know, ROI driven, this is just the recipe for an activist to get involved, if not a PE firm to start, you know, saying we’re gonna buy a company outright. And I think that with it being priced too low, and all the other things that we missed, I think that over it over a three year period, I’m probably closer to a seven. That’s a lot higher than anyone said on this call. But if you look at the long term, and just where that’s priced and, and the pieces are pretty bullish for for a longer term investment in Twilio, from today’s price, I don’t carry the baggage, like you guys said of the grumble grumble I’ve been holding through the downtrend this year. But it’s all good context and great points. Oh, we even got one we even got a one. I think that was one of the kids. But we have some, some other chime some other comments in the chat here. But there’s been a lot of fun. Any any final thoughts looking to start with you and then I go to a new one. But final thoughts on we’ll do is we’re wrapping up here the call today,
Luke Hallard 1:01:11
I feel disappointed that the company didn’t sort of live out the expectations I had for it. I’m kind of kicking myself though, I feel like I kind of was an investor asleep at the wheel a little bit on this one. I’ve learned quite a lot, actually from just reviewing Twilio in the last few days, and then realizing I need to really be on top of it with everything in my portfolio.
Simon Erickson 1:01:34
Anirban Mahanti 1:01:35
Well, Luke is just messing making me feel bad by saying that he was at sleep at will when I was reviewing the quarters, and I still didn’t get it. So every time this happens to me, I think, you know, my lesson really is that, like, I think if you invest in this type of environment, high growth, and you know, it’s very easy to say, you know, I should have sold whereas $400 or $300 or something. But at that time, it seems like it’s going to go to 600. And the problem is that when when things are going up, they keep going up. And you never know really it’s very hard. My only lesson and this is a broader lesson in trying to do better job of this. I didn’t do this personally, this is more of a portfolio allocation, I would actually not have anything to do with whether or not I hold to doubt continue holding Twilio, one of the things that I think makes absolute sense is when the market is really bullish. And it’s really on a you know, the creciendo is on and the music is going towards the finale. And John Williams is just, you know, making the London Philhealth harmonic or Crestor sound awesome. At that time, you just need to dial back and you know, move some of your portfolio to cash to trimming on the way up. It’s just I think there’s a portfolio management decision that I think just could make things better. That’s That’s my takeaway from a lot of my companies that have seen significant pullback is sometimes just blindly holding. You know, and you know, and for my myself for most of my investments are inside the tax account. For example, I’ve always thought worth selling basically means paying the taxman, but maybe paying the taxman and keeping some of the cash aside is probably the right thing to do. But that all said It’s also very easy to have a cache and deployed much ahead of bottoms because nobody knows where the bottoms are. Nobody knows where the tops are. So we’re in a little bit better position size management and things like that is what I don’t have any regret actually holding this company. And you know, I don’t think I’m going to sell it, I might, I might actually go and buy the call so that I can burn further of my money. More of my money in Sylvania. In put it in a bonfire. But I do think that I might buy actually some 2045 calls that gives them enough time to turn around. And via that’s my
Luke Hallard 1:03:55
call contract between the Senate and I’ll commit to selling you my shares in 2025. And while I will split the difference,
Anirban Mahanti 1:04:01
now that I remind
Simon Erickson 1:04:02
you three years
Anirban Mahanti 1:04:05
I’m buying a call which gives me the right to buy somebody else’s shares. So yes,
Simon Erickson 1:04:10
we’ll recap those numbers. Luke was between a two and a four on his investing score, Twilio, Anirban was a five with the Asterix that he might be buying in 2025 calls is a short term, short term to long term seven on Twilio, such a fascinating company such a battlefield sock right now mixed opinions all across the board. We hope that this was helpful and useful and valuable for tuning in as we did kind of his deep dive into Twilio. Also a reminder that I think one of the best selling points of seven investing of our services to Paulo is the things like this, we have a team of seven really, really bright advisors. And we do this exact same exercise like we did with Twilio on this live stream every single month for every single one of our recommendations actually, it’s not just issuing a report and disappearing, but you actually have to put on your battle armor when you’re pitching to this team and do your homework and do your research. Knowing that we are going to ask very difficult questions on each one of our pitches. I think that makes all of us better investors. And it’s truly valuable to do that level of diligence on every recommendation we make. And we certainly had some good recommendations for you here in November, Luke put a brand new one on the scorecard and you’re gonna put a recommendation on the scorecard. And I pulled an innovative company that was brand new onto there as well. So check us out at seven investing.com/subscribe If you would like to see all of our seven stock recommendations each and every month. If nothing else, go and get signed up for our one new $1 trial, you get the first seven days for just $1 so you can see everything that we have to offer, and then make a decision on what you’d like our platform and let’s stick around. But that’s it for checking in on Twilio. My thanks to Luke Hallard, my thanks to Anirban Mahanti. My thanks to all of our other 7investing advisors who also contributed behind the scenes for this discussion. We appreciate you tuning in. We will be posting this to our YouTube, which I posted the link to and also our podcasts next week. We are here to empower you to invest in your future. We are 7investing. Have a great day!
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